Nexen: Canada’s industry minister waiting for official proposal from Chinese company on takeover

CALGARY — Canada’s industry minister says there is no deadline for his decision to approve or reject a Chinese state-owned company’s multibillion-dollar bid for Calgary-based Nexen Inc.

China National Offshore Oil Company made a US$15.1-billion all-cash offer last month for oil and gas producer Nexen (TSX:NXY). It was a friendly bid, offering shareholders a 60-per-cent premium on their holdings.

The proposed deal promises to maintain Nexen’s Calgary base and keep all of its current employees and management.

Nexen has faced numerous challenges over the past few years, including the troubled launch of its Long Lake oilsands project in northern Alberta and recent second-quarter profits that fell nearly 57 per cent thanks to a failed well in the Gulf of Mexico.

The deal faces a review by both Industry Minister Christian Paradis and the federal Competition Bureau.

Paradis said his department is still waiting for a formal proposal from the Chinese company before a review can begin.

“I was told that CNOOC was going to table a proposal soon so that is the state of the matter. After that this will be a reviewable transaction,” Paradis told reporters in Calgary.

“I cannot speculate about deadlines. I was told there was going to be a proposal tabled soon so let’s see what happens in the future.”

Paradis said once the official proposal is received by his department the offer will be scrutinized to make sure there is a “net benefit” for Canada.

“That’s the bottom line here. Let’s not prejudge any investment. There’s a review to be done and according to the law we have to make sure there’s a net benefit,” Paradis said.

“We showed guidelines in 2009 for state-owned enterprises — this is public, this is transparent so they know exactly how we apply the law.”

The Chinese company has made several other investments in Canadian companies over the past seven years, including buying stakes in MEG Energy Inc. and a 60-per cent investment in Northern Cross (Yukon) Ltd.

If the bid by China National Offshore Oil Co. is successful, it would be China’s largest-ever overseas acquisition.

Harper’s Conservative government has rejected only two foreign takeovers in its six years in office, the most notable being the failed bid by Anglo-Australian mining firm BHP Billiton for Potash Corp. (TSX:POT) in 2010.

In 2008, the Tories blocked the $1.3-billion sale of Vancouver-based MacDonald, Dettwiler and Associates’ space-technology division to an American company.

The offer has attracted attention south of the border.

A U.S. senator wants his government to hold up the takeover as a means to press China on its trade policy.

Charles Schumer made his argument in a letter sent to Treasury Secretary Timothy Geithner, who chairs the Committee on Foreign Investment in the United States, a body that reviews foreign investments in U.S. companies.

The New York Democrat wrote that he “sincerely” hopes the friendly deal between CNOOC and Nexen goes through and that Chinese companies continue to invest in the United States.

“I urge you not to miss this opportunity — the largest foreign acquisition ever by a Chinese company — to hold China to the commitments it has made to provide a level playing field for U.S. companies seeking to access Chinese markets.”

Although Nexen (TSX:NXY) is based in Canada, it has offshore holdings in the U.S. Gulf of Mexico and CNOOC said the deal requires approval from regulators in the U.S.